Trump wants to expand offshore drilling

Oil and gas news from 19 to 25 June 2017
June 27, 2017

Trump wants to expand offshore drilling

President Trump is expected to issue an executive order Friday intended to greatly expand offshore areas in the Arctic, Atlantic and Pacific where companies can drill for oil and natural gas.

The order would essentially seek to reverse former President Barack Obama’s actions to restrict offshore drilling.

Obama took drilling in the Arctic, Atlantic and Pacific oceans off the table until 2022, and blocked drilling indefinitely in select Arctic and Atlantic areas. He also implemented aggressive safety regulations on the industry.

The order would come on Trump’s 99th Day in office amid a big push to close out the first 100 days of his presidency.

The Friday order would be aimed primarily at expanding drilling by directing the Interior Department to review the current schedule for offshore drilling allowances.

It would ask Interior to consider whether to undo Obama’s indefinite drilling bans, and it might also direct officials to look into changing some of Obama’s regulations on equipment to stop out-of-control wells and standards specific to Arctic drilling.

“Past administrations have been overly restrictive of offshore energy exploration,” a White House official said, adding that the order “directs a review of the locations available for offshore oil and gas exploration and of certain regulations governing offshore oil and gas exploration.”

Interior Secretary Ryan Zinke told reporters Tuesday that nothing is off the table in the order.

“We’re going to look at everything,” Zinke answered when asked about Pacific drilling. “A new administration should look at the policies and make sure the policies are appropriate.”

The order has already ignited anger among environmentalists, who have long advocated for further restrictions or an end to offshore drilling.

It’s just part of Trump’s effort to roll back Obama’s work on environmental issues.

Trump ordered Interior on Wednesday to consider rescinding or changing dozens of national monuments Obama created to protect land and water.

The oil and natural gas industry is excited at the prospect of new areas to drill. Though oil prices are hovering around $50 per barrel, the industry believes prices could rise, making new exploration profitable.

“We’ve been advocating for expanded access to domestic energy resources for years,” said Erik Milito, upstream director at the American Petroleum Institute.

“When you want to pursue an effective, long-term energy strategy, it’s important to make sure that you’re creating opportunities through a predictable, long-term schedule so that the industry can determine whether we have the additional resources that can help fuel our economy.”

API has long asked the government to allow exploration activities to search for oil deposits, such as seismic testing, in the entire outer continental shelf. From there, it argues market forces should be the main force behind drilling decisions, not the government.

Environmentalists are preparing to fight Trump at every turn. They say that the possibility of spills like the 2010 Deepwater Horizon disaster aren’t worth the risk of drilling in new areas.

“It’s becoming increasingly clear that drilling offshore in the Atlantic, the Arctic and even the Pacific is a bad business decision,” said Jackie Savitz, United States vice president at Oceana.

“So we would hope that having a businessman as president might allow that to be visible, and he would see that, and that if he’s doing this in the context of job creation, this is the absolutely opposite of the right answer.”

Under a lease sale plan approved by Obama last year, 10 lease sales in the Gulf of Mexico would be available through 2022.

If the administration wants to sell further drilling rights, it would have to go through an extensive process to write a new plan. That process includes multiple proposals and opportunities for public comment, which took the Obama administration nearly two years.

The Gulf of Mexico has long been the epicenter of the U.S. offshore drilling, and the vast majority of production happens there. But Congress put the eastern Gulf, near Florida, off-limits until 2022, and Trump can’t change that for the time being.

The Arctic, north of Alaska, has seen some exploratory wells, most recently by Royal Dutch Shell in 2015. Shell abandoned the effort when it determined that it was not cost-effective.

The Atlantic last saw exploratory drilling in the 1980s. Obama considered allowing some drilling there recently, but backed away.

The Pacific has a few dozen wells that have been operating for decades. But the industry there took a big hit after the high-profile, massive 1969 oil spill off the coast of Santa Barbara, Calif., which helped spawn the environmental movement.

There hasn’t been a new lease sale of drilling rights off the Pacific coast since the 1980s.

Kevin Book, managing director at consulting firm ClearView Energy Partners, said oil companies would likely benefit from opening more areas to offshore drilling. But the economic and job boosts would be years away.

“Offshore drilling isn’t a right-now kind of jobs impact. Offshore drilling is a long-term and potentially enduring jobs effect,” Book said. “And the reason it has been appealing to some of the Atlantic states over the years is because the jobs would not only be numerous and lucrative, but also there to stay.”

“The bad news is that they would take a lot of time to show up,” he said, adding that for an area like the Atlantic, it could take 10 years before oil or gas production would start.

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